Group Property Company UK 2026 — TopCo PropCo ManageCo Structure, CT Group Loss Relief (CTA 2010 Part 5), Group SDLT Relief (FA 2003 Sch 7), De-Grouping Clawback and Group VAT Registration

CT group structure, group loss relief (NTLRDs and management expenses), group SDLT relief, de-grouping clawback, bona fide commercial purpose and group VAT

The complete group property company tax framework:

• Group structure: TopCo, PropCos and ManageCo — why landlords form groups, the 75% group definition and CT group loss relief for NTLRDs and management expenses (NOT Schedule A losses): WHY LANDLORDS FORM PROPERTY GROUPS: (a) PORTFOLIO SEGMENTATION AND RISK MANAGEMENT: different PropCos hold different segments of the portfolio — e.g., PropCo 1 holds commercial property; PropCo 2 holds residential BTL; PropCo 3 holds student HMOs — so that insolvency, a regulatory problem, or a large liability in one segment cannot infect the others; (b) MANAGEMENT SERVICES COMPANY (ManageCo): ManageCo provides property management services to the PropCos under an intercompany management agreement — the management fee is a tax-deductible expense for the PropCo (reducing its CT liability) and income for the ManageCo; (c) FUTURE SALE: the group structure allows the sale of a single PropCo (by selling its shares) without triggering SDLT on the underlying properties (subject to the de-grouping clawback rules); (d) FINANCING: different PropCos can take on different lenders' mortgages without each lender needing to look at the whole group's consolidated position. THE 75% GROUP DEFINITION FOR CT GROUP RELIEF (CTA 2010 s.152): company A and company B are in the same 75% group if: A is a 75% subsidiary of B; B is a 75% subsidiary of A; or both are 75% subsidiaries of a third company C. A company is a 75% subsidiary of another if: the other company holds at least 75% of its ordinary share capital, directly or indirectly. For group loss relief, a further requirement is that the surrendering company and the claimant company must both be UK-resident. CT GROUP LOSS RELIEF — WHAT CAN BE SURRENDERED (CTA 2010 Part 5): (a) TRADING LOSSES (CTA 2010 s.99): trading losses of a company can be surrendered to any other group company to set against the claimant's total profits (in the same accounting period, or — since Finance Act 2017 — carried forward in some circumstances); in a property group, this is relevant where a ManageCo has a trading loss (management services); (b) NON-TRADING LOAN RELATIONSHIP DEFICITS (NTLRDs — CTA 2010 s.99(1)(b)): where a company's non-trading loan relationship debits (finance costs — interest; arrangement fees; commitment fees) exceed its non-trading loan relationship credits (finance income) in an accounting period, the resulting NTLRD can be surrendered to another group company as group relief; CRITICAL FOR LEVERAGED PROPERTY GROUPS: a PropCo with significant mortgage debt generates large interest charges; if the PropCo's property rental income after deducting property expenses leaves insufficient income to offset the finance costs in the non-trading loan relationship account, an NTLRD arises — this NTLRD can be surrendered to a profitable group company; (c) MANAGEMENT EXPENSES (CTA 2010 s.99(1)(d)): excess management expenses incurred by a holding company (TopCo) that has management and investment income but insufficient income to absorb all its management costs can be surrendered to group companies; (d) WHAT CANNOT BE SURRENDERED — PROPERTY RENTAL BUSINESS LOSSES (SCHEDULE A LOSSES): THIS IS THE CRITICAL POINT — property rental business losses (arising where the rental business makes a loss — e.g., in a period of high repair costs or void periods) CANNOT be surrendered to other group companies via group relief; they are TRAPPED within the company and can only be carried forward within the same company against future property rental income from the same company. This is a fundamental distinction: NTLRDs (from financing costs) CAN be group-relieved; Schedule A rental losses CANNOT. MANAGEMENT FEE PRICING (TRANSFER PRICING): intercompany management fees between related parties must be at arm's-length under the transfer pricing rules (TIOPA 2010 s.147-217 and the OECD Transfer Pricing Guidelines); HMRC may challenge excessive management fees that reduce PropCo CT liability without reflecting the genuine market rate for management services; the management fee should be documented with a proper service level agreement and should reflect the actual services provided.
• Group SDLT relief (FA 2003 Sch 7 Para 1), de-grouping clawback (3-year rule), bona fide commercial purpose requirement and group VAT registration: GROUP SDLT RELIEF (FA 2003 SCH 7 PARA 1): a transfer of a chargeable interest (freehold; leasehold) in land between two companies that are members of the same group is relieved from SDLT. 'Group' for SDLT purposes: company A and company B are in the same group if one is a 75% subsidiary of the other or both are 75% subsidiaries of a third company C. '75% subsidiary' for SDLT purposes (FA 2003 Sch 7 Para 1(2)): A is a 75% subsidiary of B if B is the beneficial owner of not less than 75% of the ordinary share capital of A AND is beneficially entitled to not less than 75% of any profits available for distribution to equity holders AND would be beneficially entitled to not less than 75% of any assets available for distribution to equity holders on a winding up. HOW GROUP SDLT RELIEF WORKS IN PRACTICE: the purchaser (transferee PropCo) files an SDLT return claiming the group relief (using code 30 in the SDLT return); no SDLT is payable at the time of the transfer; the transfer can take place at market value or any other consideration (including a debt assumption or intercompany account credit) without triggering SDLT. DE-GROUPING CLAWBACK (FA 2003 SCH 7 PARA 3): if within 3 years of the effective date of the relieved transfer, the transferee company ceases to be a member of the same group as the transferor company, the group SDLT relief is clawed back. The de-grouping is treated as if: immediately before the de-grouping event, the transferee purchased the chargeable interest from the transferor at market value; SDLT becomes payable at the THEN-applicable rates on that market value (including any applicable surcharges — additional dwelling surcharge; non-resident SDLT surcharge). The SDLT payable can therefore be substantially higher than the SDLT that would have been payable at the time of the original transfer — both because the market value may have increased and because SDLT rates/surcharges may have changed. DE-GROUPING TRIGGERS: (a) sale of the shares of the transferee to a third party outside the group; (b) the transferee ceasing to meet the 75% subsidiary test (e.g., the parent issues preference shares that dilute its economic stake below 75%; or the parent enters into arrangements that reduce its entitlement to profits or assets of the transferee below 75%); (c) liquidation of the transferee or the transferor; (d) any arrangement under which the economic benefit of the land transfers outside the group. ANTI-AVOIDANCE — BONA FIDE COMMERCIAL PURPOSE (FA 2003 SCH 7 PARA 2): group SDLT relief is denied if the transaction (or a scheme of which it forms part) is not effected for bona fide commercial reasons, or forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of SDLT, income tax, CT, or capital gains tax. HMRC clearance under SDLT anti-avoidance provisions is available (HMRC will confirm in writing that no SDLT anti-avoidance applies to a proposed transaction) and is strongly recommended before any significant intra-group restructuring. GROUP VAT REGISTRATION (VATA 1994 s.43): where all bodies corporate are established/resident in the UK and are under common control (broadly, one controls the other or both are controlled by a third body corporate — 'control' for VAT group purposes means owning more than 50% of voting rights), HMRC may direct that they be treated as a single taxable person or the group may apply to HMRC to be treated as a group. BENEFITS OF GROUP VAT REGISTRATION: (a) INTRA-GROUP SUPPLIES DISREGARDED: supplies of management services, property management fees, loan interest, and other intra-group transactions are disregarded for VAT purposes — no VAT is charged between group members; (b) ONE VAT RETURN: the representative member (typically the TopCo) files a single VAT return for the whole group; (c) RECOVERY OF INPUT VAT: all group members' input VAT recovery is calculated on a consolidated basis. RISKS OF GROUP VAT REGISTRATION: ALL MEMBERS OF THE VAT GROUP ARE JOINTLY AND SEVERALLY LIABLE FOR THE GROUP'S VAT DEBT — if any group member owes VAT (or fails to account for VAT correctly), HMRC can pursue any other group member for the debt; this includes amounts arising from any group member's activities, not just the representative member's. VAT GROUPING DOES NOT OVERRIDE THE SDLT 75% GROUP TEST OR THE CT GROUP 75% TEST — the VAT group threshold (51% control) is lower than the CT/SDLT group threshold (75% subsidiary)

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